Homework: Week 2 HW CH 4-6 Save Score: 0.1 of 1 pt 7 of 10 (10 complete) HW Scor

Question

Homework: Week 2 HW CH 4-6 Save Score: 0.1 of 1 pt 7 of 10 (10 complete) HW Score: 88.5%, 885 of 10 pts &5.4.55 Question Help Suppose that you want to create a portfolio that consists of a corporate bond fund, X, and a common stock fund, Y. For a $1,000 investment, the expected return for X is $68 and the expected return for Y is $103. The variance for X is 1,375 and the variance for Y is 11,075. The covariance of X and Y is 4,691. Complete parts (a) through (d). k fund. The portfolio expected return is $92.5 (Type an integer or a decimal.) The portfolio risk is $1 . (Round to two decimal places as needed.)

Explanation / Answer

for return R =0.3X+0.7Y

hence expected return =E(R) =0.3E(X)+0.7*E(Y)=0.3*68+0.7*103=92.5

portfolio risk =(0.32*1375+0.72*11075+2*0.3*0.7*4691)1/2 =86.82

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